Companies heading for administration jump 16%

ADeloitte
report reveals the number of companies going into administration has jumped 16%
so far this year as the credit crunch bites into British businesses, warning
things will get worse.

As the value of land stocks fall together with house prices and mortgage
approvals, property and other housing-related businesses are recording the
highest number of administrations – up 54% in the first half of 2008 on the same
period last year.

Proposals put forward by the European High Yield Association for reform of
the insolvency regime has ignited political debate and Neville Kahn, Deloitte
reorganisation services partner, notes the vast majority of administrations
involved small companies.

‘However, with the worsening economic environment, there will be increased
pressure from creditors for larger companies to enter…administration,’ he
said. ‘As a practitioner, my view is that improvements could be made to the
insolvency legislation to create a more stable platform for working out larger
administrations. The current administration process works wells for small
businesses but this is not the case for larger companies where financing has
become ever more complex.’